Ask tommy2 about Real Estate

[scotchnrocks]

Why are mortgage brokers/banks allowed to fund such loose lending practices? Who picks up the tab when houses lose 20% in value and have mortgages with little/no equity and only 3 years of interest paid? Seems like some lenders are merely operating a get rich quick scheme with no integrity.

[tommy2]

Have heard it is still overheated, but I am in the Midwest. If your hold time is over 5-6 years you should be fine unless you really rush and don't do your homework.

[tommy2]

For sure this month and almost certainly one more time this year. Prices are going to continue to drop--we are licking our chops for 2007.

[tommy2]

A law degree.

Are you any good at sales? If so, look into becomming a broker for a couple of years.

Are you good at running numbers? If so, look at becomming an analyist for a bank or REIT for 1-3 years.

Developers are ususally looking for someone who can come in with leasing or analytic skills.

Otherwise, hook up with a small developer and be the guy's gopher for a year or two. Learn the business from him.

[kyotolaw]

To scotchnrocks

Most lenders sell on those mortgages to the secondary markets - many mortgages get packaged into CMOs (Collateralized Mortgage Obligations) which spread the risk of default for the many borrowers amongst many lenders.

Example - 50 mortages for $250,000 for a total of $12.5mn. If 5 (or 10%) default, then you lose some of that money (remember you can repossess the house), and maybe lose 2.5%, tops. These then get packaged up into $1000 units and spread around.

All of a sudden the risk doesn't look so big. Amazing what economies of scale can get you. It sucks to be the borrower who gets foreclosed on, but the lender isn't risking that much.

[tommy2]

Agreed. Many people who have ARMs are first time buyers who don't qualify for a 30 year fixed now anyway. Those people are in a world of pain soon.

[tommy2]

Also, everybody in the process has a vested interest in seeing a hot market continue: obviously the brokers and mortgage brokers benefit, but so too do the bankers who make higher bonuses, appraisers who do make their clients (banks usually) happy when their appraisal allows a loan to get done, CMBS guys who need product to package, on and on. Nobody wins when transactions stop.

[Biloxi]

I would also like to get your opinion on condos on the Gulf Coast. They are flying up in my area. Is there money to be made or are they just for rich snow birds?
Avg costs im seeing are 250 and up. All are brand new and most likely on the beach. This isnt a hot spot for young people vacations and there arent many attractions left since Katrina. Should I get in before the area really starts booming or wait? Waiting would see a large rise in prices, but buying early could also lose money with lack of occupants(vacationers/renters).
and Whats the deal with shared properties?(I know alot of FL is shared ownership) good/bad

Casinos are gonna sky rocket prices when they start being completed. You should see all the crazy plans, Booming.
thanks for any info
Biloxi

[haakee]

2% cap == 5% rate to 7% rate which is a 24% change in monthly payment.

[Prelude008]

I'm interested in Real Estate. I would like to know if you are familiar or have any opinions on Dolf de Roos - Real Estate Investor's home course or Carlton Sheets?

Also, do you have any insights into the Real Estate Appraisal field (another area of interest).

Thanks.